Sustainability and Renewable Resources

The clearest application of the idea of sustainable development applies to the use of renewable resources, such as forestlands, watersheds, wildlife, and other self-generating resources and ecosystems. Sustainable use of renewable resources is easier to measure. In fact, when a renewable resource is used in an unsustainable way, faster than it can replenish itself, it takes on the character of a highly scarce, non-renewable resource. Typically, if there is a well-functioning market for the resource, price increases are a signal of overexploitation. In this respect, sustainable development resembles the late economist Herbert Stein's memorable dictum: If something can't go on forever, it won't.

It is easier to devise solutions for problems of renewable resource use. Indeed, the United States has shown the way toward correcting unsustainable practices with regard to forestry; forestland in the United States and other industrialized nations has been increasing for more than 40 years. There are signs that the unsustainable exploitation of rain forests throughout the world is beginning to ebb as well.55

Many instances of unsustainable resource use can be attributed not only to a lack of a well-functioning market, but to perverse institutional or legal incentives, such as a lack of property rights to resources, or (especially in underdeveloped nations) a lack of ready resource alternatives.56 Groundwater resources in the U.S., for instance, are often overused because of subsidies, a lack of tradable rights to water ("use it or lose it"), and a lack of clear property rights to water tables. Overfishing in the oceans provides a better example.

It is easy to imagine that cattle might be scarce, just as buffalo became scarce, if they were owned in common and were taken from one vast domain, rather than being privately owned on separate ranches. While the exact analogue to barbed wire for fishing grounds in the ocean may be hard to conceive, assigning ownership rights to the ocean should not be much more difficult than assigning ownership rights to the radio frequency spectrum, as is currently being done throughout the world.

The United States should encourage developing nations to follow this general strategy. Much of the destruction of forest resources that is of present concern is due to unsound government policies that private owners would not likely have undertaken to the same extent, if at all. Vice President Al Gore notes in Earth in the Balance: "the most serious examples of environmental degradation in the world today are tragedies that were created or actively encouraged by governmentsusually in pursuit of some notion that a dramatic reordering of the material world would enhance the greater good." And Alan Durning of the Worldwatch Institute has noted that "tenure is a key determinant of the sustainability of forest economies . . . nationalizing the forests sabotaged traditional management, creating the free-for-all it purported to avert."

There is much enthusiasm for "getting the incentives right." This produces nods of agreement on the general level, and furious disagreement about its specific application. "Getting the incentives right" should mean chiefly assigning property rights to environmental goods, rather than using government power to set the "correct price" for the use of a commonly held environmental good. Any so-called "market-based incentive" policy that involves government setting the "correct price" to establish a "level playing field" is inherently flawed, because it misunderstands the nature of markets and prices.

The government will always lack the necessary knowledge to set the "right" price, and such policies will usually introduce new distortions into the marketplace that will likely be counterproductive and wasteful of resources. A genuine "market-based policy" allows dynamic prices set through the decentralized marketplace to act as signals to individuals about the relative cost, economic as well as environmental, of their choices. Hence the hallmark of sound market-based policy is determined by the extent to which it is decentralized.